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Gambling Stock Roundup: Nevada Gaming Board Shuts Fantasy Sports Sites, Wynn Resorts Posts Mixed Results

Last week proved to be a mixed bag for the gambling industry. After missing the Zacks Consensus Estimate for three consecutive quarters, Wynn Resorts Ltd.'s WYNN earnings beat during the third quarter. However, revenues missed the consensus mark for the fourth consecutive quarter, owing to a sluggish environment in Macau. Also, both metrics fell on a year-over-year basis.

In one other move, Nevada's Gaming Control Board has reportedly ordered to cease fantasy sports sites like FanDuel Inc. and DraftKings Inc. in the absence of a gambling license.

While Pinnacle Entertainment Inc. PNK moved a step closer to its spin-off transaction by getting approval from Mississippi Gaming Commission, Caesars Entertainment Corporation's CZR subsidiary Caesars Entertainment Operating Company, Inc. (CEOC) filed an amended plan of reorganization. In one other development, Iao Kun Group Holding Company Limited's IKGH Rolling Chip Turnover recently fell for the month of September, marking the twelfth consecutive monthly decline. (Read earlier development: Gambling Stock Round Up for Oct 5, 2015 ).

Recap of the Week's Important Stories:

1. Wynn Resorts posted mixed third quarter 2015 results with earnings beating the Zacks Consensus Estimate but revenues missing the same. Adjusted earnings of 86 cents per share plunged approximately 56% year over year. The downside reflects a significant decline in revenues. However, it beat the Zacks Consensus Estimate of 75 cents by 14.7%.

Wynn Resorts' revenues of $996.3 million missed the consensus mark of $1.03 billion by 3.4%. Revenues also fell 27% year over year, owing to sluggish performance in Macau as well as Las Vegas. Adjusted earnings before interests, taxes, depreciation and amortization declined 39% year over year to $279.9 million due to a decline in revenues.

Meanwhile, the company stated that owing to the Chinese government's anti-graft corruption campaign, VIP gamblers are spending significantly less than they did a year ago. Also, the company is not sure what the environment is going to be like in the future. This further lowered investors' confidence. (Read: Wynn Resorts Q3 Earnings Top, Macau a Drag on Revenues )

2. Nevada's Gaming Control Board has reportedly ordered the closure of fantasy sports sites like FanDuel Inc. and DraftKings Inc., stating that these sites will no more be allowed to operate without a gambling license. The decision comes in the wake of reports that employees also often played on competing sites, raising questions about possible insider information being used to win.

Chairman of Gaming Control Board A.G. Burnett stated that daily fantasy sports constitute gambling and therefore operators must own a sportsbook license in order to legally offer the same in Nevada.

3. In one other development, Pinnacle Entertainment received approval from Mississippi Gaming Commission for its previously announced spin-off transaction. In Jul 2015, Pinnacle Entertainment and Gaming & Leisure Properties, Inc. GLPI had announced a transaction per which Pinnacle will spin off its operating business and the real property of Belterra Park Gaming & Entertainment Center into a separately traded public company (OpCo). Meanwhile, the real estate assets held by the remaining company (PropCo) will be acquired by Gaming & Leisure Properties.

Post transaction, Pinnacle will operate the leased gaming facilities under a triple-net Master Lease agreement with Gaming & Leisure Properties and will pay initial annual rent of $377 million. The transaction is expected to be completed in first quarter 2016. However, it is subject to customary closing conditions, additional regulatory approvals and the approval of shareholders of Gaming & Leisure Properties as well as Pinnacle's shareholders.

4. Iao Kun Group Holding posted weak Rolling Chip Turnover for the month of Sep 2015. This marked the twelfth consecutive monthly decline. Rolling Chip Turnover is used by casinos to measure the volume of VIP business transacted and represents the aggregate amount of non-negotiable chips players purchase. Iao Kun Group's Rolling Chip Turnover of $0.40 billion fell 66% year over year. Win rate for the month of Sep 2015 was 3.98%.

Iao Kun Group Holding is engaged in the promotion of five major luxury VIP gaming facilities in Macau. The downside reflects a decreasing trend at VIP baccarat due to the ongoing anti-corruption campaign in Macau. In fact, during its second quarterearnings call the company lowered its Rolling Chip Turnover guidance for 2015 for the second consecutive quarter in a row.

5. Caesars Entertainment 's subsidiary Caesars Entertainment Operating Company, Inc. (CEOC) recently filed with the United States Bankruptcy Court for the Northern District of Illinois an amended plan of reorganization and an accompanying disclosure statement. Also, it has filed to extend the time in which it alone may file a restructuring plan, to Mar 15, 2016 from Nov 15, 2015. The company had initially filed for reorganization under Chapter 11 of the United States Bankruptcy Code in Jan 2015. (Read: Caesars Entertainment's Subsidiary Files Bankruptcy )

The amended plan aims at settling litigation claims for significant contributions of cash and securities from Caesars Entertainment and improves recoveries across Caesars Entertainment Operating Company's capital structure. It will also eliminate approximately $10 billion in aggregate debt from Caesars Entertainment Operating Company's balance sheet.

Also, it provides for a tax-efficient corporate and balance sheet restructuring by converting Caesars Entertainment Operating Company into a real estate investment trust, thereby maximizing the value of the businesses.

Share Price Performance

The last five trading days were quite positive in terms of share price movement as most of the companies remained in green. Las Vegas Sands Corp. LVS experienced the highest increase of 7.8% followed by 5.3% increase recorded by Melco Crown Entertainment Limited's MPEL .

Over the last six months, shares of most of the gambling stocks have lost value with Wynn Resorts experiencing the highest decline of 42.2%, followed by 34.1% decline at Caesars Entertainment. Only Boyd Gaming Corporation and Caesars Acquisition Company gained over the same time frame.

What's Next in the Gambling World?

We note that gambling stocks have oscillated between gains and losses in recent sessions and with the earnings season in full swing, investors can expect this volatile movement to continue in the coming days as well.

Las Vegas Sands that currently has a Zacks Rank #3 (Hold) and an Earnings ESP of -1.59% is scheduled to report its earnings on Oct 21. Boyd Gaming that carries a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +20% and Penn National Gaming Inc. that carries a Zacks Rank #3 and an Earnings ESP of +5.26% are expected to report results on Oct 22, 2015.

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LAS VEGAS SANDS (LVS): Free Stock Analysis Report

WYNN RESRTS LTD (WYNN): Free Stock Analysis Report

PINNACLE ENTRTN (PNK): Free Stock Analysis Report

MELCO CROWN ENT (MPEL): Free Stock Analysis Report

CAESARS ENTERTN (CZR): Free Stock Analysis Report

IAO KUN GROUP (IKGH): Free Stock Analysis Report

GAMING AND LEIS (GLPI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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